Data anomalies and volatility recedes but still high in some markets

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist, CME Group

Data Anomalies

• Loss of millions of jobs distorts index of hourly wages.
• Index jumped to 8% inflation rate from 3% earlier in 2020.
• Savings rate soared from 8% to 33% during pandemic shutdown.
• Will savings rate remain high as economy gradually reopens?

Where Fed Has and Hasn’t Contained Volatility

• Implied volatility in 2Y, 5Y, 10Y US government bond options recede.
• Fed monetary easing behind the decline to pre-pandemic levels.
• Implied volatility in 30Y bond options, equity indices, gold are relatively high.
• Are credits spreads pointing to a feeble economic recovery?